Amicus Curiae Brief — Golden Gate Restaurant Ass'n v. City & County of San Francisco

FILED

(2) JUL 10 2009

OFFICE OF THE CLERE

No. 08-1515 L_SYPREME COURT, U.<

IN THE

Supreme Court of the United States

GOLDEN GATE RESTAURANT ASSOCIATION,

Petitioner,

Vv.

CITY AND COUNTY OF SAN FRANCISCO, et al.,

Respondent.

SAN FRANCISCO CENTRAL LABOR COUNCIL, et al.,

Intervenors/ Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Ninth Circuit

BRIEF OF AMICI CURIAE THE ERISA INDUSTRY

COMMITTEE AND NATIONAL BUSINESS GROUP ON

HEALTH

IN SUPPORT OF PETITIONER

Thomas L. Cubbage III

Counsel of Record

John M. Vine

COVINGTON & BURLING LLP

1201 Pennsylvania Ave., NW

Washington, DC 20004-2401

(202) 662-6000

Counsel for Amici Curiae

JULY 2009

QUESTION PRESENTED

Whether ERISA section 514(a), 29 U.S.C. § 1144(a),

preempts local laws mandating ongoing employer

contributions for employee health-benefits, or alternative

payments to a local government, and _ extensive

recordkeeping and reporting and disclosure requirements,

a question on which the courts of appeals are in conflict.

TABLE OF CONTENTS

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TABLE OF AUTHORITIES ...00 000.0000 ccc ccccceceeeeeeeees iv

INTEREST OF AMICI CURIABE...0... o.oo ec cccececcccceeeec eee 1

STATEMENT ................. . LeccccuceececuscsecsunceecececeeenueeeceD

SUMMARY OF ARGUMENT. ...00 0.0.00. cc ccc cece cee ec eee ees 8

REASONS FOR GRANTING THE WRIT ......................0.. 8

I. The Ninth Circuit Decision Undermines the

Statutory Goal of Allowing Uniform Plan

Design and Administration by Multi-

Jurisdictional Employers...............c.ccccceceeceeceseeeenes 8

za. The Court Should Resolve the Confusion

Created by the Conflicting Decisions of

Courts of Appeals Concerning Preemption of

Local Laws Mandating Employer Health-

Care Spending............. Rew cuctdnceeuaesedusveessessee peesuaens 15

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TABLE OF AUTHORITIES

CASES

Aetna Health Inc. v. Davila, 542 U.S. 200 (2004)............ 10

Alessi v. Raybestos—Manhattan, Inc., 451 U.S. 504

ERIE ED ictkensscasniccsccercartacscadscdarssuamiaauuiineesdtvanaacadais Z, ss

Black & Decker Disability Plan v. Nord, 538 U.S.

Ry Ss ches nsuiccdscexdasucdaxecuaasccebanustearicdeaaneisacereveaieia 2

California Div. of Labor Stds. Enforcement v.

Dillingham Constr., N.A., Inc., 519 U.S. 316

EUNUE co hn se 2unkics cocani uubacnxannsnaeaccananis aaiieene a cusadrasenaneceanounel 17

FMC Corp. v. Holliday, 498 U.S. 52 (1990) ..................... 1]

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

Gen. Dynamics Land Sys. v. Cline, 540 U.S. 581

ENUM isnc0 cai uucb ausnass waunseecaaneiumunsodauseut eileen muedaLtekasaddadaie 12

Golden Gate Restaurant Ass'n v. City of San

Francisco, 546 F.3d 639 (9th Cir, 2008), reh'g &

reh'g en banc denied, 558 F.3d 1000 (2009)........ passim

Hughes Aircraft Co. v. Jacobson, 525 U.S. 432

PIT va cioscexscsdisdesbisd eed aia chavenadeuas esse ioencamanadantsderiee 2

Ingersoll-Rand Co. v, McClendon, 498 U.S. 133

UPI coi cudnenicavuncnansdanacucdacsacarercquunceaasatoareasreuascaeiteubied 10

Johnson v. Buckley, 356 F.3d 1067 (9th Cir. 2004) .......... 6

LaRue v. DeWolff, Boberg & Assocs., 128 S. Ct.

aa at ee es a ee 2

Lockheed Corp. v. Spink, 517 U.S. 882 (1996).................. 2

Metropolitan Life Ins. Co. v. Massachusetts, 471

Ss EEE IIE 22L vncéutsdacuiescscaanss cous asmvanissaerenbensaxebusobaees 2

New York State Conf. of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) ........ 17

Retail Indus. Leaders Ass’n v. Fielder, 475 F.3d

a ee SE i, ccc cccushumnsunustoasagacbosebanetente 15, 16

Retail Indus, Leaders Ass'n v. Suffolk County, 497

PF. Supp. Bd SOS CE.D.N. Y . BOOT) ic ccscvcccccccossevessocens 15, 17

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)............. 2

Standard Oil Co. of Cal. v. Agsalud, 633 F.2d 760

(9th Cir. 1980), summarily aff'd, 454 U.S. 801

b> | ARIE EaSaRIRE ne, coer ser Moen aurea Pa oeR, eben n Cae ne RPO Te 13

Swaida v. IBM Ret. Plan, 570 F. Supp. 482

(S.D.N.Y. 1983), aff'd per curiam, 728 F.2d 159

SE Un, {ED oss os soca sah ds ph AMaanada RA MEREDT RET EEaOEeL Ebene 7

STATUTES, ORDINANCES, AND REGULATIONS

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als Oe BE ik Setesersasacapaterapadertvantacimathvccanee 13

OE coals eiecdsieh nds haidiicsanehosasnsens 3

Pub. L. 97-473, Sec. 302 (passed December 1982,

os calagaubunneueovsnentades 13

Be x, Ch, PUNT, GI BG. BOE cacenscsvecccnvccsvnecccccsscsecs: 6

S.F., Cal., Admin. Code § 14.1(D)(7) ............ cc cee ceecee cece ee ees 6

S.F., Cal., Admin. Code § 14.3...... DIA RAYS RPE CESAR A 6

BF eg Coc, PIMA. CGO BS BG. GIB) viccencescocccveccccncccssescscessenss 6

S.F., Cal., Regulations Implementing the

Employer Spending Requirement of the San

Francisco Health Care Security Ordinance.............. 6, 7

LEGISLATIVE HISTORY

120 Cong. Rec. 29197 (Aug. 20, 1974) (remarks of

I ooo tne each ty doogr a ties lelticr son aUgiauaesdusuedaesavanes 12

120 Cong. Rec. 29933 (Aug. 22, 1974) (remarks of

ae sepiuasaceeacnese 12

120 Cong. Rec. 29942 (Aug. 22, 1974) (remarks of

ee dc couunaanavasacoent 12

SUPREME COURT RULES

ee Sea inclaabealene 1

ee ea la oa as Ieaiiecedansesduacabtedies 1

OTHER AUTHORITIES

Victoria Craig Bunce & JP Wieske, Health

Insurance Mandates in the States 2008

(Council for Affordable Health Ins.,

Alexandria, Va.), Jan. 2008, available at

http://www.cahi.org/cahi_contents/resources/

pdf/HealthI nsuranceMandates2008.pdf...................... 4

Michael S. Gordon, The History of ERISA’s

Preemption Provision and Its Bearing on the

Current Debate Over Health Care Reform

(1992), reproduced in Health Care Reform:

Managed Competition and Beyond, Employee

Benefits Research Institute, Issue Brief No.

135, at 28-30 (March 1993), available at

http://www.ebri.org/pdf/briefspdf/0393ib_pdf........ 13, 13

William Pierron & Paul Fronstin, Employer

Benefit Research Institute, /ssue Brief No. 314:

ERISA Pre-emption: Implications for Health

Reform and Coverage (2008), available at

http://www.ebri.org/pdf/briefspdf/

RE ie I oivsccedesicncedecscsevaadscnsnccsaxecsnas 3, 4

U.S. Dep’t of Labor, Bureau of Labor Statistics,

National Compensation Survey: Employee

Benefits in Private Industry in the United

States, March 2007, available at

http://www.bls.gov/ncs/ebs/sp/ebsm0006. pdf............... 3

James A. Wooten, A Legislative and Political

History of ERISA Preemption, Part 2, J.

PENSION BENFFITS, Vol. 14, No. 3, at 5 (Spring

2007), available at http://www.law.buffalo.edu/

Faculty_And_Staff/susmenu/Wooten/

ERISAPreemptionPart2 pdf ..............................0.0.: 9,10

The ERISA Industry Committee (“ERIC”) and the

National Business Group on Health (“NBGH”)

respectfully submit this brief amici curiae in support of

the petition for a writ of certiorari in this case.!

INTEREST OF AMICI CURIAE

ERIC is a_ non-profit corporation representing

America’s largest private-sector employers. ERIC’s

members maintain, administer, and provide services to

health care plans and other employee benefit plans

governed by the Employee Retirement Income Security

Act of 1974 (“ERISA”), as amended, 29 U.S.C. § 1001 et

seq. All of ERIC’s members do business in more than one

State, and many have employees in all fifty States.

NBGH, formerly known as the Washington Business

Group on Health, is a non-profit organization devoted to

representing large employers’ perspectives on national]

health policy issues. NBGH is the national voice of large

employers dedicated to finding solutions to the nation’s

most important health care issues.

Together, ERIC and NBGH have well over 300

members. Millions of active and retired workers and

their families receive health care benefits through

employee benefit plans sponsored by ERIC’s and NBGH’s

members.

These amici participate in cases with the potential for

far-reaching effects on employee benefit plan design or

administration, and in which they seek to present views

1 The parties have consented to the filing of this brief after

timely notice, and their respective letters of consent have been

lodged with the Clerk. S. Ct. R. 37.2. No party authored this

brief in whole or in part and no person or entity other than

ERIC, NBGH, or their members contributed monetarily to its

preparation or submission. /d. 37.6.

that will not be presented by the parties or other potential

amict.2, ERIC and NBGH believe that this is such a case.

The Ninth Circuit’s ruling in this case—that ERISA

does not preempt local laws requiring employers to make

expenditures for employee health care, or equivalent

payments to a Jocal government, at a specified level or

higher—opens the door to a patchwork quilt of local

ordinances that will prevent employers that operate and

provide health care benefits in more than one state or

municipality from providing uniform nationwide health

care coverage for their employees. As a result of the

decision, ERIC’s and NBGH’s members face the prospect

as employers of a patchwork quilt of varied welfare plan

mandates and regulations around the country.

STATEMENT

1. Although ERISA provides incentives that strongly

encourage employer-provided benefit plans, nothing in

the statute requires employers to establish employee

benefit plans. Lockheed Corp. v. Spink, 517 U.S. 882, 887

(1996). Moreover, when an employer elects to establish

an employee benefits plan, the statute allows the plan

sponsor to define the benefits provided. See td.; Black &

Decker, 538 U.S. at 833; Metropolitan Life Ins. Co. v.

Massachusetts, 471 U.S. 724, 732 (1985); Shaw v. Delta

Atr Lines, Inc., 463 U.S. 85, 91 (1983); Alessi v. Raybestos—

Manhattan, Inc., 451 U.S. 504, 511 (1981).3

2 See, e.g., LaRue v. DeWolff, Boberg & Assocs., 128 S. Ct.

1020, 1027 (2008) (Roberts, C.J., concurring in part and in

judgment) (citing ERIC’s amicus brief); Gen. Dynamics Land

Sys. v. Cline, 540 U.S. 581 (2004); Black & Decker Disability

Plan v. Nord, 538 U.S. 822 (2003); Hughes Aircraft Co. v.

Jacobson, 525 U.S. 432 (1999).

3

A plan sponsor's latitude to define the content of employee

benefits plans is subject only to specified federal requirements

(continued...)

2. Large businesses are substantially more likely

than smaller firms to offer health benefits to their

employees. According to a 2007 survey by the U.S.

Department of Labor, among firms employing at least one

hundred workers, 93% of employers offered health care

benefits. By contrast, only 59% of smaller firmis (with less

than one hundred employees) offered some form of health

care coverage to their employees. See U.S. Dep’t of Labor,

Bureau of Labor Statistics, National Compensation’

Survey: Employee Benefits in Private Industry in the

United States, March 2007, at 15 tbl.7.4

Large firms like the members of ERIC and NBGH

typically have employees in numerous jurisdictions. Such

multi-jurisdictional employers provide a_ substantial

percentage of all of the private health care coverage

offered in the United States. See generally id. Large

firms (with more than 5,000 employees) also are

considerably more likely than small firms to sponsor self-

insured health plans. William Pierron & Paul Fronstin,

Employer Benefit Research Institute, Jssue Brief No. 314:

ERISA Pre-emption: Implications for Health Reform and

Coverage, at 11 (2008).5 The difference is significant

because ERISA specifically exempts self-insured plans

from State regulation; consequently, employers that

sponsor self-insured health plans can tailor their plans to

such as ERISA’s anti-backloading rules for accrual of pension

plan benefits, eg., 29 U.S.C. § 1054(5)(1)(B), and the

continuance-of-benefits requirements for group health plans

established by COBRA (the Consolidated Omnibus Budget

Reconciliation Act of 1986), see id. § 1162(2).

4 This Labor Department report is available online at

http://www.bls.gov/ncs/ebs/sp/ebsm0006.pdf (last viewed July 9,

2009).

5 This EBRI report is available online at

http://www.ebri.org/pdf/briefspdf/EBRI_IB_02a-20082.pdf (last

viewed July 9, 2009).

address their employees’ needs and avoid the substantial

costs and administrative burdens of complying with the

patchwork requirements of State insurance laws. See 29

U.S.C. § 1144(b)(2)(B); Pierron & Fronstin, supra, at 11.®

3. Of course, multi-jurisdictional employers are not

necessarily very large corporations with operations

nationwide. Smaller regional and local enterprises fre-

quently operate in multiple municipal, county, and State

jurisdictions. A business based in San Francisco may

employ workers in Qakland or San Jose. Likewise, an

enterprise in St. Louis, Missouri, may employ workers at

sites nearby in I)linois; one based in Kansas City may

have workplaces in both Missouri and Kansas. A local

restaurant chain based in Washington, D.C., might

employ workers, not only in the District of Columbia, but

also at workplaces in Montgomery and Prince George’s

Counties in Maryland, the City of Alexandria, Virginia, or

Arlington and Fairfax Counties in Virginia.’

4. ERISA preemption is’ essential for multi-

jurisdictional employers. Under ERISA, multi-jurisdic-

tional employers can offer a single, coordinated package of

employee health care benefits to all eligible employees,

regardless of where they live, where they work currently,

or where they might be transferred by the employer.

Through administrative efficiencies, this permits plans to

6 See also Victoria Craig Bunce & JP Wieske, Health

Insurance Mandates in the States 2008 (Council for Affordable

Health Ins., Alexandria, Va.), Jan. 2008 (listing state heaith

insurance mandates and estimating effects of comphiance costs),

available online at http://www.cahi.org/cahi_contents/resources/

pdf/HealthInsuranceMandates2008.pdf (last viewed July 9,

2009).

7 Similar “local” employers with worksites in multiple

municipalities, counties, or States could be found in

metropolitan areas around Boston, New York City,

Philadelphia, Chicago, Dallas, Los Angeles, and elsewhere.

provide health care benefits at costs that are significantly

lower than they would be under a regime requiring a

multi-jurisdictional employer to meet the varying

mandates of each State or locality in which one or more of

its employees works.

The ability to provide uniform benefits and _ to

administer plans uniformly across jurisdictional lines

facilitates the negotiation and implementation of

collective bargaining agreements that cover workers in

multiple municipal and State jurisdictions.

Preemption also is important to employees who

benefit from a coherent system regardless of where they

work, live, or obtain their health care services. Thus, an

employee who transfers or relocates to a workplace in a

different jurisdiction can continue to participate in the

same nationwide benefit plan and can retain the same

benefits that are important to him or her, particularly if

the employee or a family member suffers from a disease

or condition that is currently undergoing treatment. The

retention of those benefits is vital to avoiding the

confusion that, in the absence of a uniform plan, would

inevitably arise as a result of a transfer.

Furthermore, the ability to provide uniform benefits to

all eligible employees, across jurisdictional lines, also

fosters employee morale and avoids inequities by allowing

workers in comparable positions to receive the same

benefits »«gardless of their locations.

5. The San Francisco Health Care Security

Ordinance (“San Francisco Ordinance”) requires every

covered employer in the City to certify that it has made

the required “health care expenditure” either directly or

indirectly on behalf of every covered employee.* Direct

8 The required health care expenditure depends on the

number of covered employees, and is scheduled to be adjusted

(continued...)

expenditures include amounts spent to provide health

care coverage via health savings accounts, reimbursement

of employee expenditures, payments to third parties, and

costs incurred in the direct delivery of health care to

employees. Unless the employer makes such expendi-

tures in at least the requisite amount for every covered

employee, the employer must pay the difference to the

City to provide health care for the employer’s employees.

S.F., Cal., Admin. Code § 14.1(b){7), Pet. App. at 110a-

1lla; id. § 14.3, Pet. App. at 115a-117a.

The San Francisco Ordinance imposes related

reporting and recordkeeping requirements on employers.

Id. § 14.3(a), Pet. App. at 116a-117a. As an initial matter,

the employer must identify its “covered employees.” Id.

§ 14.1(b)(2), Pet. App. 107a-109a; HCSO Regs. § 3.1, Pet.

App. 130a-132a. A “covered employee” is one who

performs at least ten hours of work per week within the

City, including the time a transient employee spends in

the City performing substantive duties—e.g., deliveries—

and time worked by telecommuters from homes in the

City. Id. § 3.1(A)(3), Pet. App. at 130a; id. § 3.1(C)(1), Pet.

App. at 131a; 1d. § 6.1(C)(1)(d), Pet. App. at 140a.9

annually. See S.F., Cal., Regulations Implementing the

Employer Spending Requirement of the San Francisco Health

Care Security Ordinance (“HCSO Regs.”), § 5.2, Pet. App. at

138a-139a.

9 The San Francisco Ordinance effectively obligates

employers with covered employees on salary (for whom hours of

work might not otherwise be tracked) to develop systems to

record the hourly “work performed” information the Ordinance

requires. By contrast, in implementing ERISA, the Treasury

Department avoided saddling employers with such an hour-

counting requirement—even for pension plans subject to

ERISA’s 1,000-hour rule. See Johnson v. Buckley, 356 F.3d

1067, 1072-74 (9th Cir. 2004) (discussing the pertinent

Treasury regulations and noting that one of the primary goals

of ERISA is to reduce the burden of compliance with its

(continued...)

Employers also are required by the Ordinance to track

their health care expenditures. /d. § 6, Pet. App. at 139a-

142a. What constitutes a qualifying expenditure under

the Ordinance is governed by the implementing

regulations. See id. § 4, Pet. App. at 135a-137a. Apart

from stating that medical expenses currently deductible

under the Internal Revenue Code may be counted, id.

§ 4.1(B), Pet. App. at 135a, the HCSO Regulations merely

offer examples for determining what spending does (or

does not) count toward the mandatory expenditure

requirement, see id. § 4.2(A), Pet. App. at 135a-136a; id.

§ 4.3, Pet. App. at 137a. For example, the Regulations

exclude administrative expenses associated with third-

party provision of health care, id. § 4.2(C), Pet, App. at

137a, a distinction that employers find difficult to make.

The Regulations also provide that qualifying expenditures

include items that are usually treated as _ personal

expenses and excluded from coverage by many ERISA

health care plans (e.g., non-prescription allergy medi-

cations, cold medicines, and pain relievers). Jd. § 4.3, Pet.

App. at 137a.

The Regulations require the employer to provide a

detailed account of each employee’s personal information

and work history, id. § 7.2(A)(1)-(2), Pet. App. at 143a, as

well as “records [of expenditures] sufficient to establish

compliance with the Employer Spending Requirements of

this Ordinance, including, as applicable, records of health

care expenditures made, calculations of health care

expenditures required under this Ordinance for each

covered employee, and proof documenting that such

expenditures were made at least quarterly each year,” id.

§ 7.2(A)(3), Pet. App. at 143a-144a.

provisions by plan administrators); Swaida v. IBM Ret. Plan,

570 F. Supp. 482, 487-88 (S.D.N.Y. 1983) (same), aff'd per

curiam, 728 F.2d 159 (2d Cir. 1984).

T

SUMMARY OF ARGUMENT

1. Establishing a regulatory regime that allows

employers to provide uniform benefits and _ plan

administration for employees nationwide was a primary

congressiona! goal when enacting ERISA. - Congress

achieved that goal through ERISA section 514(a), 29

U.S.C. § 1144(a), which expressly and expansively

provides for federal preemption of State laws relating to

employee benefits plans. Enforcement of that preemption

provision is essential so that employers will not confront a

patchwork of myriad state and local regulations that

would prevent them from providing uniform benefits

across jurisdictional lines. The erroneous holding by the

court of appeals that ERISA does not preempt the San

Francisco Ordinance contravenes Congress’s expressed

intent and undermines its important goals.

2. The Ninth Circuit's decision created a conflict

among the courts of appeals because its analysis cannot

genuinely be reconciled with the reasoning of the Fourth

Circuit, which held that ERISA preempted an employer

health care spending mandate in Maryland. Nor is the

Ninth Circuit decision consistent with this Court’s

jurisprudence applying ERISA section 514(a). The

decision of the court of appeals in this case introduces

grave confusion as to the scope of ERISA preemption,

which should be addressed and corrected by the Court.

REASONS FOR GRANTING THE WRIT

I. The Ninth Circuit Decision Undermines the

Statutory Goal of Allowing Uniform Plan Design

and Administration by Multi-Jurisdictional

Employers

The Petition in this case presents an issue of grave

national importance, especially to the nation’s employers

that provide jobs and benefits to workers, retirees, and

their families across the land: whether Congress’s

objective of creating a regime of uniform regulations for

employee benefit plans can be subverted by myriad local

schemes that can impose varied requirements for

employer-provided health care and other employee

benefits to workers.

A. In section 514(a), ERISA contains one of the most

expansive preemption provisions of any federal statute.

Although the Ninth Circuit opinion refers to the creation

of a uniform regulatory regime as one of the purposes of

ERISA, Pet. App. at 13a, it fails to acknowledge the

strength of Congress's intent to achieve that goal and also

fails to give effect to that intent.

When enacting ERISA, Congress was not content to

provide the basis for implicit preemption by merely

occupying the regulatory field for employer-provided

retirement and welfare plan benefits. Nor did Congress

merely provide that any State regulation that was

inconsistent with federal requirements would be

preempted. Section 514(a) expressly declares that the

statute preempts “any and all State laws insofar as they

may now or hereafter relate to any employee benefit plan”

covered by ERISA. 29 U.S.C. §1144(a) (emphasis

added), !°

As Professor James Wooten observed, “preemption

issues played a pivotal role in Congress’s decision to pass

ERISA.” James A. Wooten, A Legislative and Political

History of ERISA Preemption, Part 2, J. PENSION

10 This broad preemption provision is subject to limited

express exceptions. See, e.g., 29 U.S.C. § 1144(b)(2)(A) (state

laws regulating insurance, banking, or securities are not

preempted).

BENEFITS, Vol. 14, No. 3, at 5 (Spring 2007).'' Before

ERISA was enacted, employee benefit plans were

regulated by a patchwork of State statutes, local

ordinances, and court-made rules. An employer that

provided benefits to a multi-state work force encountered

severe administrative difficulties and wasteful expense as

it attempted to comply with rules that differed from State

to State, and sometimes from city to city. Against this

backdrop, a coalition reflecting both employer and labor

perspectives sought. not only the protection of retirement

plan assets (as the Ninth Circuit emphasized in this

case), but also the establishment of a uniform regulatory

regime nationwide for both retirement and welfare

benefit plans. See id. at 10.

This Court has repeatedly recognized that one of the

primary purposes of ERISA was to achieve uniformity—

and, conversely, to prevent multiplicity—in employee

benefits regulation. See Aetna Health Inc. v. Davila, 542

U.S. 200, 208 (2004) (“The purpose of ERISA is to provide

a uniform regulatory regime over employee benefit

plans.”); Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,

142 (1990) (“Section 514(a) was intended to ensure that

plans and plan sponsors would be subject to a uniform

body of benefits law ....”). As the Court has noted,

preemption serves the congressional goal “to minimize the

administrative and financial burden of complying with

conflicting directives among States or between States and

the Federal Government.” Ingersoll-Rand, 498 U.S. at

142. “A patchwork scheme of regulation would introduce

considerable inefficiencies in benefit program operation,

which might lead those employers with existing plans to

reduce benefits, and those without such plans to refrain

1! This article by Prof. Wooten is available online at

http://www.law.buffalo.edu/Faculty_And_Staff/submenw/

Wooten/ERISAPreemptionPart2.pdf (last viewed July 9, 2009).

-10-

from adopting them.” Fort Halifax Packing Co. v. Coyne,

482 U.S. 1, 11 (1987); see also FMC Corp. v. Holliday, 498

U.S. 52, 60 (1990) (“To require plan providers to design

their programs in an environment of differing state

regulations would complicate the administration of

nationwide plans, producing inefficiencies that employers

might offset with decreased benefits.”). Congress deemed

preemption necessary to encourage voluntary employer

sponsorship of employee benefit plans.

As noted above, the presence—or absence—of health

care benefit plans may result from collective bargaining

in which the provision and content of such benefits was a

significant, but not exclusive, issue for negotiation

between labor and management. Preemption precludes

varied State and local regulation that would hinder such

collective bargaining for multi-jurisdictional workforces,

This Court has recognized thai the federal interest in

preemption is particularly important in this context. See

Alessi, 451 U.S. at 525.

B. ERISA’s legislative history underscores’ the

importance that legislators attached to its express

preemption provision. The bills passed by the House and

Senate as precursors to ERISA included a preemption

provision that was much narrower than the provision that

ultimately became section 514(a) of ERISA. The

precursor bills would have superseded State law only in

areas specifically regulated by the federal statute. In

conference, however, the conferees recognized that such a

provision would tiave only limited effect, insufficient to

preclude State regulation that would hinder uniform plan

design and administration. Senator Javits, one of the

chief architects of ERISA, explained that the narrow

preemption provision “openfed] the door to multiple and

potentially conflicting State laws hastily contrived to deal

with some particular aspect of private welfare or pension

benefit plans not clearly connected to the Federal

regulatory scheme.” He concluded that, “on balance, the

y'}

emergence of a comprehensive and pervasive Federal

interest and the interests of uniformity with respect to

interstate plans required—but for certain [specified]

exceptions—the displacement of State action in the field

of private employee benefit programs.” 120 Cong. Rec.

29942 (Aug. 22, 1974) (remarks of Sen. Javits).'*

The principal House sponsor of ERISA,

Representative John Dent, was equally emphatic in

describing the central importance of a broad preemption

provision. Representative Dent stated:

I wish to make note of what is to many the

crowning achievement of this legislation, the

reservation to Federal authority fof] the sole power

to regulate the field of employee benefit plans.

With the preemption of the field, we round out the

protection afforded participants by eliminating the

threat of conflicting and inconsistent State and

local regulation.

120 Cong. Rec. 29197 (Aug. 20, 1974) (remarks of Rep.

Dent).

The conferees understood that the broad preemption

provision included in ERISA would prevent State and

local governments from experimenting with employment-

related health care reform. In fact, one of the reasons

that the conferees expanded the preemption provision was

to preclude State-by-State mandates for employer-

provided health care. See Michael S. Gordon, The Ilistory

'2 Senator Williams similarly emphasized the importance of

ERISA’s preemption provision. See 120 Cong. Rec. 29933 (Aug.

22, 1974) (remarks of Sen. Williams) (stating that the

conference bill eliminated the threat of inconsistent State and

local regulation of benefit plans and was intended “to apply in

the broadest sense” to State or local actions with the force of

law).

of ERISA’s Preemption Provision and Its Bearing on the

Current Debate Over Health Care Reform (1992).'° When

the conferees debated ERISA, Hawaii had recently

enacted a health reform measure and California was

considering similar legislation. See Standard Oil Co. of

Cal. v. Agsalud, 633 F.2d 760 (9th Cir. 1980) (holding that

the Hawaiian law enacted in 1974, mandating employer.

provided health care programs, was preempted by

ERISA), summarily aff'd, 454 U.S. 801 (1981)."% The

conferees feared that inconsistent State laws regulating

health care would undermine employment-based health

plans, and they recognized that the narrow preemption

provision included in the precursor bills was not sufficient

to protect plans from this threat. See Gordon, supra, at

29-30.

C. The Ninth Circuit’s analysis, upholding the

employer spending mandate in the San Francisco

Ordinance, would allow a “patchwork scheme of

regulation,” Fort Halifax Packing, 482 U.S. at 11, that

could vary not only among the fifty States, but among

thousands of county and municipal jurisdictions. The

alternative to ERISA preemption in this context would be

a patchwork regime that requires multi-jurisdictional

employers to adapt their policies to the disparate

mandates of every locality and State that regulates

1S This text by Mr. Gordon, minority counsel to Senator Javits

during the consideration and passage of ERISA, is reproduced

in Health Care Reform: Managed Competition and Beyond,

Employee Benefits Research Institute, Issue Brief No. 135, at

28-30 (March 1993), available online at http://www.ebri.org/

pdf/briefspdf/0393ib.pdf (last viewed July 9, 2009).

‘4 In 1982, Congress enacted a unique exception to ERISA’s

preemption provision to allow the Hawaiian health care law as

enacted in 1974. See Pub. L. 97-473, Sec. 302 (passed December

1982, signed Jan. 14, 1983), codified at 29 U.S.C. § 1144(b)(5).

employer health care expenditures and other employer-

provided benefits.

Under the San Francisco Ordinance’s mandate,

employers must be able to prove to the City that they

have met the minimum expenditure requirement on the

basis of expenditures that the local rules define as

qualifying health care expenditures for covered

employees. Nothing guarantees that other jurisdictions—

e.g., Oakland or Los Angeles or Chicago or New York-—

would define cligible expenditures (or covered employees)

in the same way. As a result, employers would constantly

need to monitor amendments to State and local laws to

determine whether their health care expenditures count

toward the spending requirement of each jurisdiction in

which they have employees (and which employees count).

This problem is inevitable once State and local regulation

of employee benefits is permitted, leaving multi-

jurisdictional employers functionally unable to offer a

uniform, nationwide array of benefits.

A similar problem arises from diverse recordkeeping

requirements. Data that the San Francisco Ordinance

requires may differ substantially from the data required

by other jurisdictions, and employers will be forced to

attempt to meet each jurisdiction’s particular require-

ments. The problems employers face in meeting San

Francisco's recordkeeping requirements would _ be

exponentially increased for employers doing business in

multiple jurisdictions. Absent preemption of such local

mandates, employers would face a maze of requirements

that would divert time and resources from providing care

and toward compliance with the huge administrative

burden that these various ordinances would create. Many

employers would find that maintaining a health plan was

not worth the effort, assuming it were even possible.

I). Such concerns acre not speculative. Businesses

have already faced the threat of conflicting spending and

recordkeeping requirements under State and county

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health care laws enacted not only in San Francisco, but in

Maryland, New York, Massachusetts, and Vermont,

which have sought to impose spending and recordkeeping

requirements markedly different from those imposed by

the San Francisco Ordinance. See, e.g., Retail Indus.

Leaders Ass’n vu. Fielder, 475 F.3d 180, 184 (4th Cir. 2007)

(Maryland legislature enacted a statute requiring certain

employers to spend 8% of total wages on “health

insurance costs” and to make annual reports regarding

numbers of employees, “health insurance costs,” and the

percentage of compensation spent on “health insurance

costs”); Retail Indus. Leaders Ass’n v. Suffolk County, 497

F. Supp. 2d 403, 406-07 (E.D.N.Y. 2007) (county enacted

legislation requiring certain employers to make

expenditures equivalent to the approximate cost to the

public health care system of providing health care to each

employee, as determined by an administrative agency).

Even the small sample of laws described in published

judicial decisions makes it evident that States and

municipalities could take a wide variety of approaches

and impose, in the aggregate, enormous recordkeeping

burdens on employers.

II. The Court Should Resolve the Confusion

Created by the Conflicting Decisions of Courts

of Appeals Concerning Preemption of Local

Laws Mandating Employer Health-Care

Spending.

A. As the eight judges of the Ninth Circuit who

dissented from the denial of rehearing en. banc correctly

observed, that court’s panel decision cannot be genuinely

reconciled with the decision of the Fourth Circuit in

Fielder. See Pet. App. at 53a-55a (“The holdings of

Fielder and Golden Gate stand in clear opposition”). The

Secretary of Labor, in her brief as amicus curiae in

support of the Petitioner's request for rehearing in the

Ninth Circuit, hkewise recognized that the panel decision

in this case “conflicts with the Fourth Circuit's analysis of

the uniformity issue in Fielder.” Id. at 80a.

In Fielder, the challenged Marylana law required

certain large employers to spend 8% of their total payroll

on employee health benefits or to pay the difference

between the mandated amount and their actual

expenditures to the State. 475 F.3d at 183. Any funds

paid to the State could be used only to fund Maryland’s

health programs for children. /d. at 185. Although the

San Francisco Ordinance requires the City to earmark the

funds paid by an employer to provide health care to the

particular employer's employees, the two laws take the

same basic approach: they require the employer to choose

either to spend a specified amount to provide health care

directly to its employees or to pay the same amount to the

State or local government.

The Fourth Circuit held that ERISA preempted the

Maryland law because it left an affected employer with no

rational choice other than to provide its employees with

health care and thereby required the employer to alter (or

create) an ERISA plan. The employer that responds to a

mandate by providing the required health care benefits to

its workforce can hope to receive “improved retention and

performance of present employees and the ability to

attract more and better new employees.” Jd. at 193.

Conversely, an employer that possesses the resources to

provide mandated benefits but chooses to pay the State

instead gains nothing and “might suffer from lower

employee morale and increased public condemnation.” Id.

Consequently, “the only rational choice employers have is

to structure their ERISA health care benefit plans so as to

mect the minimum spending threshold.” dd.

From an employer’s perspective, the San Francisco

Ordinance upheld by the Ninth’ Circuit is

indistinguishable from the Maryland law because it puts

the employer in the same position. When economically

feasible, the employer’s purported choice between paying

= 38.

for its own employees’ health care coverage and paying an

equivalent amount to the government entity is really no

choice at all. See Suffolk County, 497 F. Supp. 2d at 417

(evaluating a similar law enacted by a New York county

and holding that “it is unreasonable to expect employers

to contribute to the community or directly to the state,

rather than to their own employees”). By far the most—

and perhaps only—rational decision for an employer that

can shoulder the administrative burden is to meet the

San Francisco Ordinance’s spending mandate by

establishing an ERISA health care plan, thus forcing it to

do what Congress in ERISA specifically sought to avoid.

B. Nor can the Ninth Circuit decision be reconciled

with the precedents of this Court construing the reference

in section 514(a) to State or local laws that “relate to”

employee benefit plans. A law relates to an ERISA

employee benefit plan for purposes of section 514(a) “if it

[1] has a connection with or [2] reference to such a plan.”

California Div. of Labor Stds. Enforcement v. Dillingham

Constr., N.A., Inc., 519 U.S. 316, 324 (1997) (internal

quotation marks omitted).'5 In this case, the San

Francisco Ordinance has an impermissible relation under

either prong of the analysis.

As the Ninth Circuit acknowledged, the amount that

the San Francisco Ordinance requires an employer to pay

the City depends on whether, and to what extent, an

employer is making expenditures in connection with and

in reference to an ERISA welfare’ beneiit plan.

15 In determining if other state laws had an impermissible

“connection” with ERISA plans, the Court has looked to both

(a) the objective of ERISA as a guide to the state laws that

Congress understood would survive and (b) the nature of the

effect of the state law on ERISA plans. See Dillingham, 519

U.S. at 325; New York State Conf. of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645, 656-59 (1995).

a4

Businesses that sponsor ERISA health care plans whose

scope of coverage and qualifying costs make those

employers “Full High Coverage Employers’—to use the

Ninth Circuit’s phrase, Pet. App. at 10a—owe the City

nothing under the San Francisco Ordinance.!® Yet

employers that sponsor ERISA plans that entail less costs

than the City’s spending mandate, or whose plans do not

cover all required employees—“Full ‘Low Coverage

Employers” and “Selective High Coverage Employers,” id.

at 10a-lla—must pay amounts to the City that are

determined by the shortfall between their costs or

coverage and the San Francisco Ordinance’s mandate.

Consequently, the financial obligation imposed by the

Ordinance on an employer in San Francisco is directly

“connected with” any ERISA health care plan that the

employer has chosen to sponsor. Although the Ordinance

scrupulously avoids using words such as “employee

benefit plan,” “welfare plan,” or “group health plan,” its

definition of “health care expenditure” (Pet. App. 110a)

encompasses the costs to employers of providing and

administering such ERISA plans and thus refers to such

plans in determining the quantum of the payment due, if

any, to the City.

C. The Ninth Circuit opinion undermines ERISA’s

preemption goals by emphasizing another congressional

objective: to protect against misuse of benefit plan assets.

See Golden Gate Restaurant Ass’n v. City of San

Francisco, 546 F.3d 639, 649 (9th Cir. 2008) (referring to

“the first underlying purpose of ERISA”), reh’g & reh’g en

‘6 Those employers nonetheless are required to comply with

reporting and recordkeeping requirements of the San Francisco

Ordinance.

« 18 «

banc denied, 558 F.3d 1000 (2009).'7 That purpose,

however, is neither inconsistent with nor of greater

importance than Congress’s intent to broadly preempt

patchwork State regulation of employer-provided benefit

plans, including health care and other welfare benefit

plans. !8

Given employer health care mandates that already

have been enacted in multiple jurisdictions, and the

presence of the Ninth Circuit’s decision as a putative

roadmap foi State, county, and local governments to

follow, the conflict among the decisions of the courts of

appeals promises to engender recurring controversy and

litigation. That conflict is ripe for resolution by the Court

at this sme.

D. Finally, the amici note that the current Congress

has begun the process of considering federal legislation

aimed at expanding the availability and lowering the

costs of health care in this country. Contrary to the City’s

assertion in its response to the Petitioner’s request for a

stay of the court of appeals mandate,!* this circumstance

17 |t appears that this portion of the text of the Ninth Circuit

decision was inadvertently omitted from the Appendix to the

Petition.

18 The Ninth Circuit's decision also circumvents congressional

intent regarding preemption by relying, in part, on the

assertion that ERISA was not intended to preempt either State

regulation of heath care providers or governmental provision of

health care services to persons with low or moderate incomes.

Pet. App. at 14a. In doing so, the opinion relies on a sleight-of-

hand that leaps from traditional State regulation of health care

services and State agencies’ delivery of health care to the public

(both allowed by ERISA) to State-imposed mandates that

employers provide health care benefits (preempted by ERISA).

19 See Docket No. 08A824, Joint Response to Application for

Order Staying Mandate and Vacating Stay of District Court

Judgment, at 25-26.

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increases, rather than diminishes, the need for correction

of the Ninth Circuit’s erroneous decision. All the

significant health care reform proposals currently under

discussion are similar in at least one respect: they give

credence to and depend upon the continuing participation

of employers as vital sponsors of benefits providing access

to health care. Enforcement of ERISA’s preemption

provision is essential to that goal; conversely, as the

framers of ERISA recognized, a _ balkanized legal

environment could be fatal to it.

CONCLUSION

For the foregoing reasons, the amici respectfully ask

this Court to grant a writ of certiorari to resolve the

important question presented herein.

Respectfully submitted,

Thomas L. Cubbage III

Counsel of Record

John M. Vine

COVINGTON & BURLING LLP

1201 Pennsylvania Ave., NW

Washington, DC 20004-2401

(202) 662-6000

July 2009 Counsel for Amici Curiae

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